Service sector hits fresh 5-year high in February: ISM

The services sector grew at a slightly faster pace in February to another five-year high, according to an industry report released on Thursday.

The Institute for Supply Management said its index of national non-manufacturing activity rose to 59.7 from 59.4 in January. The reading came in just above forecasts for 59.5.

A reading below 50 indicates contraction in the sector, while a number above that level means expansion. February's reading was the highest level since August 2005.

The services report's employment component rose to 55.6 from 54.5 and was at its highest level since April 2006.

The employment reading mirrored ISM's manufacturing report earlier in the week which showed companies' willingness to hire improved at the strongest pace in decades.

What we are beginning to see in the labor market is that the service side for the economy is catching up to the manufacturing side, and small business, which has lagged both, is beginning to accelerate as well, said Eric Green, chief economist and head of rates strategy at TD Securities in New York.

This is consistent with a shift higher in the overall pace of job creation.

U.S. stocks and bond prices were unchanged by the data.

The prices paid component rose to 73.3 from 72.1, its highest level since September 2008, while new orders dipped to 64.4 from 64.9.

Earlier data on Thursday showed claims for unemployment benefits fell last week to their lowest level in more than 2-1/2 years, signaling an acceleration in job creation could be under way.